Currently,Powell Products Has a Beta of 1

question 72

Multiple Choice

Currently,Powell Products has a beta of 1.0,and its sales and profits are positively correlated with the overall economy.The company estimates that a proposed new project would have a higher standard deviation and coefficient of variation than an average company project.Also,the new project's sales would be countercyclical in the sense that they would be high when the overall economy is down and low when the overall economy is strong.On the basis of this information,which of the following statements is CORRECT?

• A) The proposed new project would have more stand-alone risk than the firm's typical project.
• B) The proposed new project would increase the firm's corporate risk.
• C) The proposed new project would increase the firm's market risk.
• D) The proposed new project would not affect the firm's risk at all.
• E) The proposed new project would have less stand-alone risk than the firm's typical project.

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Definitions:

Acetylcholine

A neurotransmitter that plays a role in muscle movement and various brain functions.

Norepinephrine

Neurotransmitter substance released from most of the postganglionic neurons of the sympathetic division; hormone released from the adrenal cortex that increases cardiac output and blood glucose levels; also called noradrenaline.

Myenteric Plexus

A network of neurons located between the layers of the gastrointestinal tract, playing a crucial role in the regulation of digestive tract motility.

Interstitial Cells

Cells located amongst the tissues of an organ, often referring to cells in the testes and ovaries that produce hormones.